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fiscal cliff deal. meantime, treasury warns the government will hit its legal borrowing limit by monday. it's thursday, december 27th, 2012 and "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen. becky continues to have the day off today. our guest host today is bob broska. house speaker john boehner urging the senate to come up with a passable fiscal cliff solution. he's promising to at least consider any bill that the upper chamber produces. senate majority leader harry reid now expected to base any legislation on a bill passed earlier this year to continue tax breaks for households will
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incomes below $250,000. a senate bill would likely contain an extension of expiring unemployment benefits. and the other big news of the morning, treasury secretary tim geithner unveiling a plan to buy time under the debt ceiling. in a letter to congress, geithner saying that treasury is going to begin taking steps this week to delay hitting the government's 16$16.4 trillion borrowing limit. treasury will take several measures to save that next year to keep the government from reaching the limit for about two months. but geithner warns it is harder to predict how long the delay will last because of all of this ongoing fiscal cliff negotiations making it harder to forecast what revenue and tax spending will be next year. the journal says right here the white house and congressional leaders have shown no signs of progress in the
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senate or elsewhere. and then, you know, i don't think we've run this bite enough. >> tim geithner told steve liesman. >> i have it ready. >> that he is we should show it multiple times. >> tt is the administration prepared to go over the fiscal cliff? >> oh, absolutely. there's no prospect to an agreement that doesn't involve those rates going up on the top 2% of the wealthiest -- remember, it's only 2%. and all of those americans get a tax cut on the framework of the first $250,000 of their income. >> yeah, yeah, you still get the 250, andrew. they love that. what does oh, absolutely mean, bob? >> maybe it means his favorite movie was "rebel without a cause." >> go the.
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>> i guess it's letting the other side know you're willing to go eyeball to eyeball with something that is terrible. >> i see both sides pretending to say, yeah, we're doing all we can, but it's almost just like this -- like boehner just said, hey, you guys, you happen, in the democratic-controlled senate, you put a bill together. i'd love to consider it. he can't get his guys to consider a democratic bill. >> as long as they feel like they can blame the other guy, they feel they have cover. this is not really where we want to go with this. this isn't simply miscalculation. this is a different kind of cold calculation. and i think it's very -- >> dangerous. you know what happened is in the market yesterday? >> and i don't know if we're thinking that was a function of -- what time did geithner come out with that statement?
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>> are we now finally seeing the beginning of the end of the market's reaction or did the market's downturn yesterday help? >> i like to call it the physical speed bump. it's not a big deal, right? but we have the speed bump, we have the debt ceiling and then we have this grander bargain. so i don't really buy the aurm that if you smooth out the fiscal cliff, then you go on and do other things. >> with the speed bump, if you're going too slow, which the economy is, if it's a big one, you go up and you might want make it over. and then if you're going too fast, you go up in the air, take out your transmission.
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>> what happens if you have a low car? >> it's bad. you hurt your undercarriage. but spain and the undercarriage is not something any of us need. but i think that howard dean, we didn't have time to go back and get howard and stuff. but howard said the best deal the democrats are going to get is to go over the fiscal cliff. taxes go up, then you go the republicans in position where they're getting the lower taxes. then patti murray. >> i just hope that people are paying attention that what we are seeing is basically the best world for politicians, they put off the and then everybody is going to pretend, oh, it's something happened. and nobody in the meantime is representing the interest of the
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american people. you know, we've got both parties in a position to negotiate this is what we want, this is what we elected and they're doing everything they can to not pay attention to that and to go to their separate corners and to be separate and to pretend that their way is not the only way. >> and it could result in people being called into, like, their supervisor's offices and their supervisor goes, i'm sorry, people are actually losing jobs because of this. >> but is there what the people voted for? there are some that think this is what the president voted for. >> how can you think that the american people didn't vote for this? >> let me get to these economical reports. there are a number on today's economic calendar. maybe most importantly are the weekly jobless claims, expected to rise by 4,000. and that would be to 356.
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and at 10:00, new home sales and consumer confidence which will be interesting to do. also this morning, the kansas city fed survey. the lead story in the journal today is a 6.9% rise in house prices so far this year. since january. and some people are saying after some false starts, residential has concerned. >> well, you're right. >> you can have some recovery, some have firmness in housing prices, but it's going to drive the recovery on the back of housing. that's not going to happen. >> and people are choosing who to hook up with. i couldn't tell whether that spoke to you or whether you thought it was odd. you thought it was a pretty good idea, i think. you don't want to go out with someone who has a 200, do you?
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>> do you think eharmony should add a little line, what is your credit score? >> what is your credit score. >> and people are dating now on -- >> can you trust someone who you give your attentions to and eventually give your heart to that doesn't pay your bills? would you? it makes sense to me, doesn't it? >> i don't know about that. >> you could stay with the person, too. >> change them? >> wasn't that the problem when you're -- you don't want a lasting relationship with someone who has been -- >> what are the economics of this? how would an economist look at this issue? mean, what it means is you've got two people who have bad credit scores. they're probably not wrong for each other, that's right. >> i think they're meant for each other. >> they're meant to be renters.
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>> that's good. all right. we've got some other news to get to. specifically, global market nurse. japanese socks -- >> it's not on your tie. >> is it? >> the yen is at a low. >> we're doing too much in the back. >> yesterday we talked about that. yours has pound, sterling, dollars, i can't -- all right. >> is there a credit card on there, too? >> i don't think. >> but the yen, they are going to keep that low. that's because of this new guy, abe. >> markets reopen today following the christmas and boxing day holidays. light volume across the board. but we did have marginal
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movement, the cac up 4.2%. the ftse 100 up above .23%. >> u.s. equity futures at this hour -- whoa. hold it. >> what are you looking at? u.s. equity futures. >> it's okay on. didn't we already do this? >> i don't care. i really don't. the new prompter is giving you fits. and yesterday, it ended with a -- did you see that one yesterday? a word ended with a n and the next one i introduced the like like t. boone pickens or something like that. >> we have a new teleprompter and it adds words. >> that's special. >> and people that, you know, that's where we get all of our info, right out of that baby there. anyway, futures are up 14 points. 13114 is where we are right now. i don't know.
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fiscal cliff is three days away and we're still above 13,000. that's what we're talking about. you would think if the growth was going to flow based on us going over the cliff, you would think oil would start to weaken. we haven't seen that much in that respect, either. as far as the ten year, stable at 98 of 6719. finally, gold -- i don't know. bernanke is on full 85 billion a month mode and it's below 1 hup. >> i don't understand that much. do you? >> i guess it's fair to say that the markets trust him. >> maybe so, or there's nobody
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else to trust. >> at this point, he's all we've got, i guess. >> that was sort of what was in bernanke we trust. isn't that the name of the book? >> i have to go whack and look. >> u.s. must find investors committing the lead amount of cash. investors have become nervous about mu nis over the potential discussions in washington. it could alter the tax exempt status of securities. and in corporate news, $1.1 billion to settle a u.s. class action over claims that millions of its vehicles accelerate unintentionally. the proposed settlement will compensate customers for economic losses related to possible defects in toyota vehicles. it covers most of the litigation involving unintended
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acceleration. so it does not cover claims for wrongful death or injuries. >> what a racket, though. >> the torque. plaintiff lawyers. $1.1 billion. >> do the math. >> that will always be -- >> and the plaintiffs get a third. is that how this works usually? >> that will always be a great business. won't it? it will always be a great business when you have someone like toyota. i don't know what happened with those. toyota tried to claim it was like use error. >> and then people said it was the mat. >> i don't know what finally came of it, but it was -- >> they never really said. >> no, but it was $1.1 billion, with a "b." >> nobody knows that it was, but you asked for it and you got it. >> yeah, yeah, yeah.
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and the guys that did the class action -- i don't know what firm the was. probably a bunch of them. amazon getting a new survey today, ranked as the best shopping for online shopping. l.l. bean had the second highest ranking. meantime, jcpenney's suffered if largest drop in any online retailer. >> think about who is running that line. >> were among the worst in transforms in online shopping this season. i hear so many people who like i don't know. >> my wife loves it, her friends love it and penelope. >> yesterday we had someone who had never seen an episode of the
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"odd couple." >> i have seen "the odd couple." you have, but our guest host had no idea who jack klugman was. i don't know if i can talk to people like that. that's why you see old people get crankier and crankier. anyway, i wonder if kelly -- is it time for the global markets report? is this familiar at all, kelly, that music? >> no. joe, i knew you were going to come to me as soon as you mentioned whippersnappers and the odd couple. i am sad to report that i don't actually know that much about it beyond the fact that maybe ross and i are the contemporary version of the odd couple. >> that's an idea. you know walter mathou and jack lemon were the original -- no? >> yes, rings a bell, yes. happy to report. >> but you don't know jack lemon? >> i should bring -- you know,
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joe, i have my family back here. my dad and my brother could talk to you about this for hours. >> you don't know the annoying orange, though, right? >> i don't know the annoying orange, either. i do know what's happening in markets overseas. stocks are for the most part higher. but the big story today for 2012 12k3 probably for 1213, it's going to be japan. look at the nikkei adding .9%. it's up 22% this year. the flip side of that is that the yen is weakening. overnight, that is something tell them they known know what they're going to look like. and at the same time, you had detail about cabinet ministers,
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including carl asso. they're equity .ing about another 10 trillion yen or so to come in january with some detail on what measures on the physical side may compliment that. abe has threatened to rewrite the boj's mandate to include a 2% inflation target. the question of the central bank independence are huge and certainly deserve to be raised and considered here in light of all the discussion. but, again, .9% on the nikkei. we can show you quickly what's happening with the yen. it is at two-year lows to the dollar. you should also consider why currently wars are returning in 2013. it will be the bank of japan taking on everyone trying to weaken its currently. it could mean a lot more balance sheet expansion and a lot weaker currencies to come. >> kelly, for homework, i'm looking at annoying orange.
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you google annoying orange. there's 126,341,474 hits and you would make that 677. but 126 million. andrew hadn't. >> i hadn't heard of it, either. but i did google it. >> i refuse to give them that last ex either. whatever the annoying orange is, i don't think i'm going to like it. >> it's funny. it's an orange but it's a guy eeps lips. i figured i could speak to you. >> i'm not very good with pop culture in general. maybe we could talk about kanye west. that's pretty much it for me. >> andrew is going to -- you give her a quick -- >> no.
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shahmu. and a powerful winter storm pounding the east. details on all these airport delays are thousands, i think, during a heavy travel period. that's coming up next. excuse me, sir i'm gonna have to ask you to power down your little word game. i think your friends will understand. oh no, it's actually my geico app...see? ...i just uh paid my bill. did you really? from the plane? yeah, i can manage my policy, get roadside assistance, pretty much access geico 24/7. sounds a little too good to be true sir.
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i'll believe that when pigs fly. ok, did she seriously just say that? geico. just click away with our free mobile app.
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welcome back to squawk. sea world is filing an ipo of up
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to $100 million. would you pay for that? >> i love -- have you done it? >> i have done it. >> raincoat. >> you have to wear it, absolutely. it intends to list the common stock under the symbol seas, s-e-a-s. now it's time to check out what's going on in the weather, including this winter storm we've got going on along with east coast. reynolds wolf joins us from the weather channel. it seems slightly better though, this morning, reynolds. >> it is better. it's affecting fewer people. but the major population clusters in the northeast. buffeted not by the heavy snow in new york city, but you get some strong winds. we're talking wind gusts 60, maybe even 70 miles per hour. the farther south and farther to the east or west you go, the better it's going to get. parts of the southeast, into the mid-atlantic states and back
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into the central plains, it's not bad. northern plains dealing with the scattered snow showers. 15 degrees in bismarck is as high as it's going to go. out to the west, we're seeing another storm system trying to make its way on shore and also some scattered showers along the coast. but the big thing this storm is going to affect obviously is going to be your travel. it's going to be a mess for you in many places including new york city. showers should be out of there by mid day, but the wind is going to continue. that will give you backup necessary boston, portland, maine, and in buffalo, new york, certainly a mess there, too. guys, back to you in new york. >> scott nations joins us from the futures pits in chicago. and we were talking about 13, 1,000 and it looks like no resolution and maybe they'll surprise us, but do you think we're on some type of precipice in the market? what about the market itself? >> i think the broad market is
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not very happy. i mean, we saw that yesterday in the s&p, got mushy. particularly the retailers. obviously, that has more to do with christmas. but the vix was interesting yesterday. got up to about 19 1/2. a level we haven't seen in a while. i level you would probably expect to have seen earlier in the whole fiscal cliff fiasco. but i think that's probably the best indication of what the market is thinking right now as far as about the cliff, anyway. and i would not be surprised at all to see the vix get above 20, particularly if the s&p rolls over a little bit today from essentially an unchanged opening, which is what it seems we're going to have right now. so i think the vix is about 20 with the cliff unresolved. makes a lot of sense and i think you'll see people who want to put that trade on and buy some protection in the form of options. >> it's hard to believe there isn't anyone out there now who hasn't factored into his plan going over the cliff.
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isn't it? >> you would think that people would be prepared for it, but, you know, particularly last week the vix didn't move very much. and it has been lower than it probably should be. now, i think part of that also is the fact that low volumes either in the summer or in the holidays generally don't encourage people to rush out and buy openings. and i think that that is part of what was going on, at least earlier in the month is that people who historically don't have a tendency to want to buy options were competing with people who were afraid about the cliff and i think now that we're only about four days away that people who are worried about the cliff had the upper hand. >> so 2013 ends up about -- what do you think? it's going to be a good year overall or it's all dependent on what happened? >> no. for the broad markets, i think it will be a better year than average. i think the s&p will end up anywhere between 12% and 15%. 1650 would be my price target.
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i am an index guy so i think that the indexes tend to go up high single digits most years, but we're coming out of a pretty big trough, so we have some catching up to do. i think we're do that catching up in 2013. i think china is coming out of some of their troubles. crude was up a fair amount yesterday. and if you look at, say, the crude chart and the caterpillar chart, they're very similar. big round trip from the lows of the summer, big high. but now we're building a base and if china is going to end up doing better, then all the infrastructure that caterpillar supports is going to be great for that company. >> yeah. housing, you saw that in the journal today, huh? that has to be -- that might offset, if we could get housing going again, that might offset a lot of things happening in d.c. >> great news about housing prices finally. although i'm also the kind of guy who thinks that actually a little inflation or actually a fair amount of inflation would be great for the housing market.
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for some people, it's the only way that they're going to get out of this situation they're in in housing. that is they're under water on their homes. for a nation of debtors, inflation is a great thing. it doesn't do a whole lot for savers. but if you're under water on your house, inflation might be the key. >> thanks, scott. i think we had you back on today because we didn't read your options actions promo last time. i'll make sure i do it this time. >> how could you not do the promo, joe? >> don't miss scott on optionses actions friday. it's not just him. it's other people, too, if you don't like him. coming up, copper and corn, we have a lot of news. back in just a minute. lost your appetite for romance? and your mood is on its way down. you might not just be getting older. you might have a treatable condition called low testosterone or low t. millions of men, forty-five or older, may have low t.
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good morning. welcome back to "squawk box." here on cnbc. i'm joe kernen along with andrew ross sorkin. becky quick is enjoying some time off today, making headlines the threat of imminent labor unrest at these ports. there are four pacific northwest ports. it's been averted. the dock workers union says its workers will stay on the on job despite substandard controls. both sides are leaving the door open to further negotiations. meanti meantime, about 15 container cargo ports on the atlanta and gulf coast are bracing for a strike by nearly 15,000 union
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dock workers on december 30th unless shippers extend their contract. and commerce on a key stretch of the mississippi could be halted earlier than expected next week due to low water levels. this could disrupt shipment of grain and other goods and it could do it for months. shippers have been watching a street of the mississippi between st. louis and cairo. and you never know if you were pronouncing it right, some of these others like bagoda or lima, ohio, or versailles. you never know but i think it is cairo, illinois, due to concerns about potential closers.ñ >> i'm not looking at you. >> all week on cnbc we've been focusing on the prospects for 2013. sheer is sharon herson with the outlook for commodities.
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>> resources that come out of the ground hinge on everything from the weather to how easily it's found in nature. the worst drought in nearly 50 years sent agriculture commodities skyrocketing in the summer. wheat, soybeans and corn were among the best performers in the market this year. in light of the devastation to many crops, farmers will ramp up planting to record levels next year. and if weather patterns return to normal, production will also reach new highs and pressure grain prices along the way. and then there's gold. the precious metal made a run twice this year, but then fell short. will the new year be the year gol a new high? additional sovereign debt and continued action from central banks around the world to the market and the economy could send gold on another record run. and then there's palladium. the market will turn to a deficit on 2013 in the
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increasing demand in the auto industry where palladium is used in systems for cars. combined with the global system supply. a rally that began in earnest at the end of 2012 will go into overdrive in the new year. . >> joining us now is dan dickert. you just said palladium. that's a big pick for you? >> i was surprised that sharon spoke about palladium. it was my sleeper bet for 2013. >> what's going on with palladium? >> it's a real industrial metal. it's in short supply. it's undertraded, underowned and one of those industrial metals. it's one of those sleeper metal plays that you can make. used in vehicles? >> in the cat converters. that's the main use for them. there's a real shortage that's been going on in palladium.
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>> look into the crystal ball. give us an oil price if you came back here a year from today. >> this is the toughest one ever. this is the third year i've conpredictions for you twice. it's not so bad. >> you said it would fluctuate? >> there was one guy who said it would rachet between $130 and $160. i said you have to do better than that so i will do better than that. i think that the trend is in place and we'll get a higher low every year since the recovery in 2009. >> a higher low? >> a higher low. so you will not see anything below $78. i have been waiting for that based upon the fiscal cliff negotiations to find that low so i could get long for the long-term. the upside of the oil is bounded by the geopolitical problems that we might see in 2013. >> and we might see many. how do you predict -- >> there are a couple that we
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know about. we know about iran and there's a couple that we don't know well and don't talk about. there's a lot of oil being taken out of kurdistan. they're going to get a little squishy about oil rights. northern iraq in 2013. that's an area nobody is really looking at. in 2012, the only time that you saw spikes in the oil market it was because of geopolitical issues. it was not because of fundamentals. there's not any analyst on the screen who could give you a fundamental reasons why oil should go up. >> give me a fundamental number. what's your price target? >> the lowest are easier to see. i think you get a higher low in 2013 compared to 2012. that means nothing significant under $80. the upside, again, is bounded by what happens geopolitically and i particularly like being long at some point here. considering that it's acting so strong despite the fact we're
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about to go over the fiscal cliff. so -- >> is that surprising to you? we talked about it briefly the other day with you. >> it's where to be in energy. you know, natural gas -- one of the things about natural gas which i love is that everybody kind of -- you see them come on your show and elsewhere on cnbc and they talk about this great boom that's going on in shale drilling. and i'm on the other side at this point and this is a tremendous bust in shale drilling that's going on because the price will not allow the innovations to move forward at this point. there's no demand source that's coming back into the market. >> a little better. >> there's no transport demand session coming back. >> it's better than 180. it's not what's needed for a real excitement about the fuel which is $5, $6, $7. >> so should we have a national policy to try to use more of this national gas and pump prices up and get people to do that instead of focusing on solar and hoping we'll have sun? >> yeah. by the way, i think that we should be doing both. that's really -- i think we should be doing both. but in terms of natural gas in
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2012, there's been failure after failure after failure about incentives for natural gas as a transport fuel. and without that flukt build out, you're not going to get any more excitement about this. there's been a steady nature about how much natural gas we've been pulling out of the ground in the united states. the shale revolution only makes sense if you find another demand source some. lng, for example, is at least five or six years away and billions and billions of dollars. chevron, in fact, bout out the rights to a big plant in canada. merely because it's so expensive to be an exporter. you have to have such big pockets to attempt it and it's years and years away. i don't see 2013 as a turn around for natural gas. >> we have a longer conversation to have about this. >> and i'm always ready to come on and have it with you. >> if you have comments or questions about anything you have on squawk, e-mail us. coming up, it's the season for giving and our next guests are turning to technology to make doing good even better.
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but first, as we head to break, the u.s. economy held hostage to the fiscal cliff in the words of a corporate executive. >> hi. my name is madeleine elfano. we employ 400 people. the fiscal cliff is going to impact our business who knows how much we can spend to increase our business and expansion may not be possible. the customers are so uncertain as to how they're going to spend their money that eating out may be considered a luxury. this is not a partisan issue. this is an american issue. the american people have been on a roller coaster for the past four years. it's time for them to get on stable ground. they have carb steady, with carbs that digest slowly to help minimize blood sugar spikes. [ male announcer ] glucerna hunger smart. a smart way to help manage hunger and diabetes.
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you won't take our future. aids affects us all. even babies. chevron is working to stop mother-to-child transmission. our employees and their families are part of the fight. and we're winning. at chevron nigeria, we haven't had a reported case in 12 years. aids is strong. aids is strong. but we are stronger. and aids... ♪ aids is going to lose. aids is going to lose. ♪ we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn
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welcome back to "squawk box" this morning. steinway musical manufacturer says it has decided not to sell itself. steinway seas it has received several nonbindingcations of i.
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>> how do people that need help
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get access to a macintosh to let you know? how do they connect with you when they probably don't have access? >> you know, we tend to help working class people. most of the people who are prescreened recipients on our site go to work every day like you and i. they're hard working americans who have a hardship that force them to fall short. what we do is help those people who can't get government assistance and who frankly don't want it. allows people to help others in the way that you would help a neighbor or help a friend. >> how does it work exactly? give me an example. >> sure. so people aren't giving on for tax breaks. they're giving $10, $15, $20 at a time. and with the fiscal cliff we're hearing so much about, there are a lot of people in america who are working poor, falling through the cracks. and americans want to give, not for tax deductions. they want to give to help their
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neighbors. they go on the site, pick the family they want to help and what we do is provide the platform and we distribute the give in kind. so our families who we vet never get cash. we pay doctors, we pay landlords, we pay tuition. it is the future of giving. you're not going to stuff a check in an envelope at christmastime like a parchbt. you want accountability. you want to be able to choose who you want to give to. >> but going back to joe's question about the family, so you're choosing these families? there's a self-selection of some sort. >> yes. >> so we are inundated with requests that come through the site for help. these are elderly people needing eyeglasses, kids ready to graduate from college who can't afford the basics, working mothers, working fathers. one of the categories we were surprised about are working single fathers.
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they come to the site and we vet them. a very small percentage of those that come to us make it through, but those on the site, you can have 100% confidence need what they say they need. >> and this is a national site. >> national site. >> is there a certain region where you're more popular than others? are you building out certain areas? >> great question. it follows poverty trends in america. so there are pockets in the south, pockets in the appalachian mountains, pockets in urban areas that where there's poverty, there is going to be people needing help. and you know what? they're finding can deliver their needs quickerer, more efficiently than anything out there. we're passionate about helping as many as we can. >> is it set up as a corporation or a nonprofit? >> we made a kshgz decision not to be a 501(c)3 for many
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reasons, including there's no limit to where we can direct the money. so we can help anyone with any need that's legitimate. but here is the thing. the 501(c)3 exemption was added to this tax code in 1917. as beau said, there are more than 1 million registered 501(c)3s right now and poverty is at its historic high. if you're a business, that's a model one could argue isn't working. we're letting the market decide. we're letting the american people decide. do you want to give $50, $75, $100 on >> how do you pay your expenses? >> as a start-up with investment, we create jobs and pay our people. but beau, who is the ceo and i take no money out of it. but we're trying to build value. >> but do you guys own the company? you're the shareholders of the company? >> we own the co >> is there a percentage of the donation that goes to overhead
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or how does that work? >> there's a transparent 18 cents on every dollar that goes for our keep the lights on fee is how we list it on the site. >> 18 cents for every dollar? >> yes. but i want to help a single dad in new york who has two kids in school or something. i'm from -- let's say you're from california. i want to help a single mom in california with a medical need. you can target who you give to. >> i would have thought you could have got in donations to cover your overhead. right now, what, 82 bucks for every 100 is going to -- to help people, but that other money, obviously, is being held back and i'm thinking to myself, is there a different -- >> as a 501(c)3 you're very
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limited to we wouldn't be able to target who you help. you can't earmark gifts in a 501(c)3. you put the money to a pool and hope it gets distributed to family in need and you're not sure whether it gets paid to an executive to get a car. you don't know where your money goes. >> gentlemen, thank you. fascinating and great work. we appreciate you coming in. >> thank you. thank you very much. >> hope you'll check out the site. >> so coming up, we're going to head the chairs and talk about the stories grabbing our attention this morning. perhaps even a little annoying orange when we return after the break. you know how to mix business... with business. and from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a pro.
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we're in the chairs. you turn into your father. you know that. and i guess my dad maybe would talk to me about walter winchell, or i don't know, will rogers, and who are these people? you know. >> i knew will rogers. >> okay. but, so, with -- okay so kelly is in her 20s and i mentioned jack lemmon and okay, so you don't know jack lemmon. he's dead and gone and but, from the odd couple i said you must know annoying orange. and i got nothing with annoying orange. >> i didn't know annoying orange. >> it's huge. i think the first one, my kids love it, it is annoying and really funny, though. he's an orange that -- that talks to other fruits, and he insults other fruits.
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>> what is it? >> orange you glad i didn't say apple again? >> he's got that laugh. this was the original one, andrew, 126 million hits. on youtube. it had an emmy award winning tv show that resulted from it. but it's a huge cultural phenomenon at least among children. so i just wanted to show you who i was talking about. forget the guy's name. >> hey, apple? >> what? >> can you do this? he's very, very annoying. but it is a huge -- has a huge cult following. you haven't seen it either. right now you feel enriched from this? >> i usually don't spend my time looking at this stuff. but i can see that i'm missing something. >> i don't want to know what you spend your time looking at. this is our final -- what are you going to talk about, andrew? >> i was going to pull out "the new york post." >> okay. >> and talk about -- >> that woman -- >> on the cover. >> why? >> there's some people who would like to jump off this cliff.
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>> because of the woman, you're talking about? >> it looks so attractive. >> you are the perfect tabloid reader. >> i am. >> they put one girl in a bikini on the cover -- >> and i say maybe the cliff is a good idea then. >> you're like looking at a -- >> i said -- >> you're married. >> i'm married. but -- >> you go to a museum, there's a velvet rope, you can't really touch the artwork. >> no! >> but you can ogle it. you can like stare at it for hours. >> you're allowed to work at the artwork. but you have to just look at it from afar. >> you can't touch any of the sculptures? >> no! don't even try. don't even think about trying. >> and they don't throw it off the cliff in the museum. >> they don't do a cliff dive. >> all right. so what can you leave us with? housing is good? >> fiscal cliff is bad. >> is that a net-net? >> i think the housing is good but the housing isn't great. everybody's talking about housing like it's going to carry us some place. it's just not going to drag. but it's not going to be a boost and i'm still very concerned about where the economy is going. >> is there any way that we've
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over -- sort of had too much anxiety and angst about the fiscal cliff or not? >> i don't think there's been much anxiety. and i talked to my brother and sister in suburban detroit. they're not in the financial world and they're always talking about the fiscal cliff. my wife has the same thing with her brothers and sisters, they're not in finance but it's what everybody's talking about. everybody's worried about it. but the experts tell us that we're not going to go over the cliff so they know it's there but they don't think we're going to go over it. so we'll see. >> i hope you're right. thank you for being here. >> coming up, is washington ready to go cliff diving? we're going to find out after the break. this december, remember -- you can stay in and share something... or you can get out there and actually share something. ♪ the lexus december to remember sales event is on. this is the pursuit offection. [ male announcer ] feeling like a shadow of your former self?
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the state of the banking industry, bank united ceo john cannis is here with what he sees
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ahead in the new year. then meet a disrupter who is diversifying your investment options. >> plus a retail wrap-up on this year's buying trends, and what investors could expect from the airlines in the coming year. >> bad news. fog is getting thicker. >> and leon's getting larger. >> the second hour of "squawk box" begins right now. good morning and welcome to "squawk box." back to "squawk box," hopefully, on cnbc. i'm joe kernen along with andrew ross sorkin. becky quick is off today. that was pretty smart of her. you got to do it fast. the minute the year before that the vacation requests open up for the next year -- >> she marks them down. >> on christmas week, she's on it. by the -- you know, we're not -- we're like, duh, and then we look -- >> here we are. >> yeah, here we are. we're glad to be here, though, it's fine, because we have john
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cannis which is going to be awesome. futures up 26 points, about what we lost yesterday. headlines this morning you wonder why does someone grow up to be a lawyer, an ambulance chaser? check it out. toyota has agreed to pay $1.1 billion to settle claims related to that pedal getting stuck. the unintended acceleration. the settlement still needs to be approved by a judge who is expected to review it tomorrow. it was a class action suit. toyota recalled more than 14 million vehicles because of acceleration issues and just do the math on $1.1 billion and you can see, it's no longer at cuss finch is it, andrew? >> here we go. >> it's not the public defender's office, it's john edwards, and $100 million net worth. >> correct. so big payday for law firm and toyota deal. the big firm, of the winner, hagans berman. do you know them? >> no. >> seattle based law firm that serves as the lead council in
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the class action set to receive more than $300 million. not bad work if you can get it. >> how much? >> $300 million. taking a third. a little less than a third. >> -- magnetic business cards as the ambulance passes by. >> right. >> i would buy some stock in those today, right? for these guys. you wonder why texas is doing a little built better. because they have put in some rules in place. i'm sorry. >> no. >> you come from a lawyer. >> i do. but we -- my dad doesn't have magnetic business cards. we don't do ambulances. >> no, you were on the good side of things, wasn't he? >> most of the time. >> all right. not all the time? all right. yeah, you did have that sign, i forgot, from the smoker's litigation, where did that -- asbestos? where did that come from? >> the steinway? >> dock workers at four u.s. ports in the pacific northwest will remain on the job despite an ongoing labor dispute. grain shippers unilaterally imposed new contract terms after
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the two sides couldn't come to an agreement. terms that the dock workers union say are sub standard. but both sides have left the door open to further negotiations. and the treasury department says it's going to hit the government's borrowing limit this monday. adding another complicating factor to the ongoing fiscal cliff negotiations. emergency accounting measures can give the government between six and eight weeks of additional time. president obama winging his way back to washington today, with the fiscal cliff deadline looming. cnbc's eamon javers joins us now with more. with the capital building as a backdrop. all i'm thinking about is the game sunday night. and when i think about washington. but there are other things happening, right, eamon? >> there's a lot of back to town stuff going on here in washington today, joe. we've got the president coming back. he abbreviated his holiday in hawaii. the senate is coming back. the house of representatives meanwhile is going to hold a conference call for all republicans later on today. but it's not clear that all these folks, including the president, are going to have much to do when they do come
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back to town. there's no deal pending on the table here on the fiscal cliff and we're creeping up here on new year's eve. and then yesterday, as you just mentioned, treasury secretary tim geithner really upped the ante in dramatic stakes in the fiscal cliff end game by saying that the united states is going to hit its borrowing limit on monday. now he said the treasury can put in place some extraordinary measures and it has some wiggle room there but he said that the doubt and uncertainty over the fiscal cliff really clouds the prospect of exactly when the united states is going to hit its debt ceiling, statutory borrowing limit. so, that all adds a whole element of drama to all this. and it's really not clear, guys, at this point, how this thing is going to get resolved. but the house has said that it would like the senate now to go first after the house had been taking the lead in negotiations earlier on. and they say they stand ready to vote, at least, on whatever it is that the democratic controlled senate will pass. it's not clear, however, that anything that could pass the senate could also pass the house, which is controlled by republicans. so, guys, it's kind of a mess
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and that's where we stand right now. >> this idea that the pressure has now been ratcheted up as a result of the letter that geithner sent. but wasn't this known? i mean was this really a dramatic play or was this a power play by the treasury department and the administration to try to actually put some pressure on this other conversation? >> all of that is true. it was known within the circle of people who follow, you know, theshry and what's going on over 24r. but i don't think it was known widely among of congress up on capitol hill. a lot of those folks have said we'll do this in two parts. we'll have the fiscal cliff negotiation, and then later in the early part of 2013 we'll have the debt ceiling fight. and those will be two separate fights. now, by announcing that the deadline is monday, they're going to have the two separate fights at the same time. they're going to have to roll this thing into the same package. that is what the white house wanted all along. they wanted a debt ceiling resolution in this deal, whatever deal comes through here on the fiscal cliff before new year's eve. that is what it looks like
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they'll have to get if the u.s. wants to avoid defaulting on its debt. now, you know, the wiggle room here that geithner talked about is kind of interesting in this letter because he doesn't know how much wiggle room he has, and ironically, if we go over the fiscal cliff, that would presumably be better in terms of wiggle room on the debt ceiling, because tax revenues would go up, and so more -- there would be more revenue coming in to the federal government for them to do something with, for the next couple of months. >> remember we had someone yesterday, and i forgot eamon, yesterday said that boehner walked away. remember, was it the guy, the democratic guy, andrew? said boehner, why did byner -- they were so close, only a couple hundred billion apart, why did boehner walk away? wasn't there an insistence that you do two years for the debt ceiling that they didn't waiver on? >> yeah, there are a couple of elements that boehner didn't like in what the president was proposing. one was the semipermanent or multiyear debt ceiling deal, which he thought gave up too much control from congress. and then the other one was, they didn't think that all the
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spending cuts that the president was proposing were, in fact, real. they thought that the president was proposing savings from spending on interest that you wouldn't have to make if you brought down the deficit a little bit. they thought that shouldn't count under the limit, and that was a couple hundred billion dollars there. >> but the two-year thing was probably a nonstarter because, you know, we're going to talk to john cannis in a second because i sort of thought all along that if we went over the cliff it was good for the president, because he gets tax rates back to where he wants them, without negotiating at 400,000, or 500,000, or a million, just goes back to 250, and then, what republican is going to vote against a tax cut for 250 and below? >> right. >> and it just seems like such an easy way to do it. i don't think i would have given up anything, either. i would have waited for that to happen. >> don't you think that it seemed like we were really close to a deal a week before christmas where suddenly the president was caving in on what level at which these tax
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increases would go? >> yeah, but we're just -- >> and boehner was -- >> is it all about taxes though? i'm so sick of that it's about this 2% tax -- the spending and entitlements are what we should have been focusing on. and that kind of, when the republicans kept saying he's not coming to, you know, that we're not seeing any real give on spending or entitlements, and then what did they say they did the cost of living stuff, i guess that's what they threw back. but i still didn't see the left harping that much about what was being given up. paul krugman doesn't count. >> meanwhile there's a whole not a lot of anything going on in town in terms of a sense of urgency today. we have had months of drama leading up to these calm of days here and you would think people would be running around in the street pulling their hair out. but everybody seems pretty calm about the prospect of going over the fiscal cliff here in washington. that, as you say, that may be what it takes, because we go over the cliff, and then we can deal with this thing in january. and i'm not sure how markets will react to that. you guys have a much better feel. >> we didn't really react that much to the end of the possible
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end of the world. so i mean that was probably going to be worse than -- >> the mayan thing? >> yeah. that was probably going to be worse than this. so we didn't really react much to that. maybe we shouldn't be surprised. >> right, yeah. maybe everything will be fine. the mayans were wrong. maybe tim geithner is wrong. >> how did they do? why are we listening to them anyway? are they still around? >> exactly. >> anyway, eamon, thanks. >> thanks, guys. >> before we move on, i just want to make one clarification. we were talking about how much these lawyers in this toyota suit are going to make and i got more information for us. it's actually slightly less than $300 million. that was the estimate. the lead lawyer now says it's $200 million, but 18% of the total of the $1.1 -- >> he's messaging you? >> no, no, no. but i got a note from somebody else. more importantly it's going to be split among 85 attorneys. so 85 people are going to split the $200 million over 25 different firms. so just a little -- >> why is it only 200? they needed better lawyers
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negotiating their fees on this one. >> you should not be worrying about mr. berman, however, because he also won the settlement against exxon in the valdez spill, so i think that he's doing probably just fine. >> right, yeah. an oil tanker chaser with the business card, right? >> little boats. >> all right. >> our guest host this hour is john cannis, bank united president and chairman. and i want to get into banking. i want to get into your outlook on what's going on in the the world of wall street and finance but given that we are on the cliff, on the precipice, if you will. maybe we're not, depending on how you think about it, maybe the way to start this is to say how do you think about it? >> i thought we'd talk about palladium. i thought it was a dance club. >> yeah, that's right. it was a dance club. >> you were never there. >> i've heard about it. >> your father told you. >> yeah, right.
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>> my daughter is a lawyer also. but she doesn't -- she doesn't quite make those kinds of money. well, it wouldn't be the first time that washington threw a hail mary pass if this were to get resolved in the next couple days. >> your expectation, though? >> well, a couple days ago, i mean, i think it was reasonable to assume it might happen. i think the treasury secretary yesterday might have foreclosed that by adding what he added. it is a little scary to think that yesterday, he sort of noticed that monday we're going to run out of money, so, tough to believe that's not somewhat politically motivated. that would require to solve that and to solve the fiscal cliff problem would require an omnibus plan, not just kick the can down the road. it's looking more and more like most politicians in washington have figured out that it's going to be easier to reduce taxes than to raise taxes.
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>> let's say we're having this conversation a month from now. i'm not convinced we're having this conversation on the 3rd or the 4th or the 5th. i think it's possible we could be the end of january or possibly even into february, in which case you are talking about some form of omnibus plan because ultimately you're going to have to deal with the debt ceiling as well. >> i think it's more likely that happens and as this goes on for a few more weeks that the pressure of the debt ceiling adds to the drama here. and that we ultimately come up with something of an omnibus plan between now and february. or there are some things that are scheduled to take place in very early january which would have to be attended to by congress. payroll taxes. >> how would this impact your bank? >> well, that's hard to say. i mean, we -- we hear everybody here, this show and on the street, and on wall street talking about how people are holding back from spending because of the fiscal cliff. >> are you seeing that? >> no. no, we're not. we're seeing people are holding
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back from spending because they don't have customers who are buying enough goods to require them to go out and buy capital goods and to hire more people. our industry is a good example. i know we're going to talk about that a little bit later, and there's some reasons to be a little bit optimistic about banking that's coming here. but a lot of that is driven by cost control. and cost control in this industry means the elimination of more jobs. so there's bad news wrapped up in this good news. >> right. >> and so i -- i don't think that it's the fiscal cliff that's -- that everybody's sitting on the edge of their chairs waiting to get solved. i think we're more of us are waiting to see where this economy goes. listen, we're going to raise taxes. and we're going to cut spending. both of those things will have something of a debilitating effect on the growth of gdp this coming year. we just don't know how much. we don't know where the baseline growth for gdp is. >> you're going to be here for the rest of the show. >> i am. >> stick around. we're going to be getting more
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of your perspective both on these issues and the world of banking, wall street and other things. >> coming up, why retailers are blaming the fiscal cliff for the holiday blues this year. first, though, as we head to break, the u.s. economy held hostage. >> if congress allows the economy to fall off the fiscal cliff, the budget for the u.s. air force will be cut by $4 billion. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade. it's another reason more investors are saying... sfx- "sounds of african drum and flute" look who's back. again?
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retail stocks took a beating yesterday following slower than expected holiday season sales. joining us on set michael brown, partner in a.t. kearney's retail practice. do we know, you have a good number for me? is 2 1/2 the number, between 3 and 4, do we know? >> the numbers are all over the place depending on what time period you're looking at and who's numbers you're looking at. most of the consensus is going to be that 2.5%, 3% range where it was forecast at the beginning of the season. >> 3% to 4% would be better. >> it looks like it's going to be closer to the 3 number. >> every year we sweat this out and there's not a whole lot of deviation from the mean most years. is there more this year because of the cliff? >> yeah, i think the cliff is partially about it. but you have to look at where we come from. beginning of the season, we saw the economy turning around. we saw construction increasing. we saw consumer confidence being up. all of a sudden then, we had the impacts of sandy, a tragedy up in newtown, connecticut, and
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just a lot of other factors that just put a damper on the season. >> so, it is fair to say that it started better than it ended now. >> it started better than it ended. there was a lot of excitement around black friday. i mean it was almost like the super bowl. they have all this advertising, drag people out, it's the biggest event of the year come shopping, and then week after that we had the pro bowl. there was no excitement. there was no reason to come out shopping. so big bang, but it kind of waned as we went into the season. >> how much of the season is in the books now? i mean, what's still left to happen? >> there's a couple of big days still coming. i think this weekend is a big weekend as people redeem gift cards, go into the stores, exchange items for what they're looking for. hopefully get that add-on sale and people start to take advantage of the clearance sale, i would say, though, 95% of it is in the books. we've probably got some strong days ahead of us, though, that could move it one way or the other. >> what do you mean if we go over and we don't get a deal that we'll see that in february? >> i think what we're going to see is we're going to see it over the next couple of months. i think we need to get a deal
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one way or the other. because indecision is the worst thing for the market. what you've got is a consumer who wants to go out and make a purchase but they don't know, do i buy the $300 item because i'm going to get a tax break or do i buy the $250 item because i'm not? and they're just waiting. i think it's more money waiting in the wings. once we get to a decision, people will be released and get out there and shop again. >> yeah. go ahead, andrew. >> did you see -- there was an article in "the wall street journal" yesterday, the additional cost that black friday created? the way that we approach -- the way that retailers approached it this year, by moving everything earlier, by bringing people in early, that there was this idea that somehow it came so early there would be all this pent-up demand and people would decide to buy even more as the season progressed, and this strategy, if this was a strategy shift, was just fundamentally wrong? >> yeah. >> do you agree with that? >> well, i agree with it, because black friday has always been about who can be first. none of the extra hours are additive. but you've got to be first to the dollars. >> just keeps bringing --
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>> it just keeps adding cost. >> right. it keeps adding cost. it extends the hours. it keeps trying to bring people to the stores but most are staying home and shopping in their pajamas online and it's just adding a lot of extra cost to it. >> it is about being first. next year what's going to happen? is it still going to be a race to be first? race to black friday? or are people going to say, we learned our lesson? >> i'm hoping they're going to say, we learned our lesson and we can go back to some sanity. 6:00 is a great time to open. people can go out, they can enjoy the holiday. but moving it into thanksgiving is probably not the best move. >> so, has there been a consumer confidence number that's downticked at all? we haven't seen a downtick yet. >> no. the consumer confidence numbers are the strongest point in two years. >> is confidence going to downtick? >> i don't know that confidence is going to downtick. >> housing is more important than the cliff? >> housing is very strong. the cliff is an indecision issue. which way do i go? do i make the bigger purchase? do i make the smaller purchase? but if we resolve it, we can release that money --
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>> whatever it is, they're making -- finish on that we're making many more purchases online. we've like passed an inflection point on that, as well. brick and mortar is tough, right? >> it's my opinion. we passed an inflection point. you really saw it in the holiday traffic in the stores. there weren't a lot of people there. the consumers are shopping online. i think that puts a damper on sales also. because the online shopping experience is very targeted. it's very mission focused. i go on and i buy an item. if you go out to the stores, you wander, you browse, you pick something else up, you put it in the shop cart, you got a good sales associate, they'll recommend something to you. so i think we really kind of just made the consumer be very laser focused, buy their one item and get out. >> they can't go to the cheesecake factory on a computer, can you no >> no, you can't. >> california pizza kitchen? >> so retailers made a mistake by driving too many people to the internet? >> i don't think they made a mistake. it was inevitable. what they have to focus on this year is driving them back to the store. >> how do you do that? >> you've really got to start
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looking at what a flagship does. give them events. give them reasons to come to the store. give them entertainment. give them a relationship. that's going to be the thing that really will drive them -- >> real quick, who does that well? >> i think this year we saw macy's do a lot of good things in terms of kriefing traffic to the store. whether it was their letters to santa campaign, indents in their harold square store. you've got to bring that passion back. 20 years ago, why did you go to the store at christmastime -- >> window shopping. >> window shopping, and the stuff in the lobby. >> the piano player. >> sit on santa's lap. now nobody has santa anymore. >> does facesy's not have santa anymore? >> macy's has it but the bulk of the retail stores doesn't have it anymore. there used to be a santa in every department store. now we've really not given people a reason to come to the stores anymore. >> there's a holiday elderly man is what they're called now. a holiday bearded person, right? you can go and, i don't know. anyway, michael, thank you. appreciate it. >> my pleasure. >> okay.
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welcome back to "squawk box" this morning. we've got a couple of fun stories to bring you. grey's anatomy star patrick dempsey says he wants to rescue a coffee house chain and more than 500 jobs. he's leading a group attempting to buy tully's coffee. the company filed for chapter 11 bankruptcy protection back in october. dempsey has a strong tv tie to seattle, he plays derek shepherd on grey's anatomy. the drama set in the fictional seattle grey's hospital. also in the news, has remained in the top spot in the annual customer satisfaction survey of online retailers. amazon has been number one for all eight years the survey's been conducted. the l.l. bean website came in second place this year. while, and rue la la dotcom and were near the bottom. jcpenney's website, had the dubious distinction of showing the biggest year-to-year drop in the rankings.
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mr. johnson's got some work to do. coming up we've got predictions for 2013. the airlines ready to take off in the new year. stay tuned for that. you won't take my life. you won't take our future. aids affects us all. even babies. chevron is working to stop mother-to-child transmission. our employees and their families are part of the fight. and we're winning. at chevron nigeria, we haven't had a reported case in 12 years. aids is strong. aids is strong. but we are stronger. and aids...
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welcome back to "squawk box" this morning in in the headlines, investors will have several pieces of economic data to consider this morning as we head into the last three days of the trading year. and in about an hour we're going to get the labor department's weekly jobless reports on initial jobless claims which economists expect to rise slightly to $364,000. then coming at 10:00 eastern time we're going to see the latest data on new home sails and consumer confidence. new home sales are expected to raise 3.5% in november from october levels and consumer confidence seen posting a drop for december. we'll see what those numbers portend. and a notable achievement for the movie industry. reporting the number of tickets sold increased for the year for the first time in three years. revenue usually rises every year because of higher prices but ticket sales have been sliding with 2011 seeing the lowest number of tickets sold since 1995. i think i helped that yesterday when i saw zero dark thirty. >> it's a nanny thing, right?
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>> my kids were with their grandparents. >> young grandparents. >> yeah. >> excellent. good to see those. and the theater's probably close. >> it's close by. >> we went to "annie" yesterday. a happy ending. you know she gets -- >> love annie. >> and the girl looked just like annie. dog was good. but the -- ended at 4:40. so we went out into that -- >> into the rain -- it was snowing. >> 2 1/2 hours to get back to new jersey. people in new york they walk out of broadway -- >> the subway. >> jump in a cab. >> they go to a restaurant. yeah, it's serve. airline stocks -- and they took a shot at new jersey in "annie." she was going to, you know, the fake parents, the mudges, she was going to live on a pig farm in new jersey. airline stocks up 20% year-to-date but should they expect smooth skies in the new year? sheetz phil lebeau with a look at the airline sector in 2013.
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>> in 2013, the merger dance between us airways and american airlines will finally play out with a decision by the amr board and the creditors committee early in the year. if the two airlines merge, they would challenge united for the title of largest airline in the u.s. but a merger may also signal a top for the airline stocks that have been steadily rising in 2012, in part due to speculation of consolidation in the industry. next year expect to pay a little bit more when you fly as airfares are projected to move slightly higher. but the biggest increase is the fees we'll be paying for everything from checked bags to services on the flights. speaking of being on board flights, 2013 may be the year we finally keep cell phones, and electronic devices, on while taking off and landing. increasingly leaders in the aviation industry, and in washington, are saying there's little evidence phones, ipads and computers will interfere with a plane taking off for
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landing. even if that changes, don't expect the faa to decide it's okay to call and talk on your phone while in flight. and that's welcome news for all flyers. >> joining us now is the forecast for the airlines in 2013. hunter kaye senior analyst. is there more to think about than just what happens with jet fuel? >> yeah. you know, historically airline stocks are not correlated to jet fuel. only in times of crisis. >> the stocks themselves. >> exactly. we saw a big correlation in the summer of '08 and in the fourth quarter of 2008 from the 147 down to 31. >> does anything impact the business of the -- >> in terms of the business? >> more than that? >> yeah, i mean, there are long-term factors like getting rid of capacity, and routes and stuff like that. >> yeah. i mean this industry has really done an incredible job transforming itself through consolidation, capacity cuts,
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and lots of fees, charging for everything. consolidation, capacity, and charging everybody for everything. it's really led to a much more stable industry than i think a lot of people realize. the first time in the history of the business since it's been deregulated in the '70s that they're going to make profits. >> you can invest in the airline industry now? some people say -- >> oh, yeah, absolutely. >> some people would say, buffett for example, never do it again after usair. >> i mean, look. i'm not going to criticize warren buffett but that opinion was formed before the industry transformed itself back in 2008. he's been burned on airlines and he's done. a lot of people, institutional biased against investing in airlines. >> i'm old enough to remember, you know, with my parents, we would try to go to fly in the '70s, and it was like $700 round trip. it's still cheaper than it was in the '70s. and the only other thing i can think of are computers. don't they need to charge more? >> the industry was deregulated by jimmy carter in 1978, right? so the government was setting the pricing back then when you were flying in the mid '70s.
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so the difference now, and deregulation worked. on an inflation adjusted basis airfares are down about 40% since 1978. >> unbelievable. >> it really is. it's the best deal, still. >> even on a nominal basis. >> even with all the hassles that you have to put up with. is it worth more? i mean it's hard to say what, you always talk about fairness, what's the fair price to go from new york to california? >> it should be the cost of the product plus about a 10% operating margin. >> is that what it is? >> no. >> what is it? >> the thing is, i mean, airlines, i think, would be very well-served to -- and we're talking more about the netwo network -- >> they're kind of an anomaly when people think network rrieknow, first quarter, fourth quarter is a problem historically within the industry. it's not the peaks. the peaks are fine. it's the troughs have been so deep that you're making a negative 40% operating margin in february, or on a saturday afternoon when no one wants to ply. that's going to kill you if
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you're making a 20% operating margin and people do want to fly. retail has been fantastic for the industry. they invest in the capital assets they have to utilize when there's not enough demand to fill the planes and the troughs bring the entire thing down. so as airlines have pulled capacity out, they've done a good job not just cutting with an ax but sort of trimming in the flights that are 40% full. >> are you a believer that there is going to be a merger with american? >> yeah, absolutely. >> is that pretty firm? >> delta bought a refinery. delta bought a bunch of old planes. but it was all great moves, wasn't it? >> yeah, we'll see. the refinery -- >> you don't know? >> i don't know. >> how about the old planes? does everyone need brand-new planes, and deep in debt? >> that is one of my pet peeves in this industry. boeing has been selling ice to es kim owes now for about 50 years in my opinion. for some reason, airlines depreciate aircraft over a 25-year period but they're told to buy new ones when they hit ten years old and it's just not the case. ownership costs -- >> andrew wants brand-new planes because he thinks the fuselages are better? >> i just want to go on the new
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dreamliner. >> but you can refurbish -- a plane is not like a car. you can refurbish a plane and the metal -- >> customers don't know. they don't know. 90% of the customers -- i know what kind of plane i'm on. most don't. they see leather seats and bright lights and -- >> how about united with those great pods, though? when i go now my kids, if it's a six-hour flight we don't even want to get off, if you are lucky enough to be able to have the mileage to upgrade you're in the -- it's like an entertainment center and the seat goes back. they refurbish most of the planes with those. >> those pods are like $250,000 each to put in. >> is it worth it? >> yeah, long haul international premium travel has historically been the bread and butter for this industry. but as you're looking now about how it's changed, why has it changed, it's not just that making the money more, it's the guy that's taking his four kids to kissny world checking three bags, flying at the back of the plane. they're making money on that. >> charging for the bags. >> yeah.
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charging priority boarding and bags. that used to be a negative 80% margin customer just to get the capacity to fill up the planes so they could sell that premium. >> i like being able to buy something. like a sandwich instead of waiting for that chicken, i don't know what it is, like from chernobyl farms, it's got three breasts. >> i like that chicken. >> you like that chicken? >> there's no expectations. . >> i don't even know if it is chicken half the time. i'd rather buy and pay for it. >> customers like choice. >> i bring my own food. >> boy that goes without saying with you. i think -- hunter keay, thank you, appreciate it. >> see you later. >> coming up our disrupters series continues with the ceo of betterment. betterment. it's a low-cost personal investing company that hopes to change the way people save for the future. then at the top of the hour, political strategists from both parties on the odds of getting a debt deal by the end of the year.
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i love when they do that. welcome back. we're continuing our disrupters series now with an app and
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website that helps you make money and awarded 9 title best start-up in new york. john stein is the co-founder and co-ceo of betterment personal investment company that blends the convenience of online banking with the high returns of stocks. good morning to you. >> good morning. great to be here. >> so, john, explain to the viewers who may not be familiar, what is your site and company do? >> betterment is a better investment. we're reshaping the investing industry, and -- >> what does that mean? >> which is what we're trying to help give our customers better control of their money and their lives. we give them what they want. which is a great return, great customer support, and transparency. and we do all of that efficiently because we have technology and automation. >> so i've been to the site, and i was sort of tooling around trying to figure it all out and figure out what to do. the idea is that you're offering
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what seemed like very low-fee money management, but i'm trying to understand what you're investing the money in and how it works exactly. give us an example. >> that's right. it's very low fee. and we're investing in etfs. we have essentially two options. like a stock portfolio and a bond portfolio. and we're doing this. so the whole thing is curated. it's an advised investing solution. but we're very transparent about what you're investing in. >> so if i have ten grand or 100 -- if i have ten grand or 100 grand to invest with you, and i call you up, i go online, i hook my checking account up, i wire you the 100 grand, what happens to the 100 grand? >> so, that 100 grand is seamlessly, instantly, invested for you in a basket of eight etfs. and the mix of those etfs is selected based on your goals. it's personalized for you. you use our website and the tools there to tell you how much you should invest and exactly how you should invest it and then we automate everything
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else. you can have automatic deposit going from your checking account. automatic reinvestment of your dividends. >> how is this different than -- than an e-trade, for example? >> so, e-trade might be a competitor. but e-trade is this old-fashioned account. this is the next generation of investing. that automates all of this good behavior for you and guides you to better decisions. e-trade doesn't do very much in the advice realm and they charge you for every trade. >> what happens if your advice is no good? >> so our advice is really the textbook, classic, you know, efficient markets, and broad diversification, steady, long-term wins the race. it's what's proven over the long-term to be the best advice for most savvy investors. >> how much money you got under management now? >> so we have about $100 million under management but we're growing at about 20% a month. >> hmm. not bad.
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>> yeah, it's good. >> how old are you, can i ask? >> i'm 33. >> you're 33. when -- how did you start the company? where did you get the backing? where did you get the idea? >> so, my background is in investing and banking. i work for many big institutions. i studied economics at harvard. i had a cfa. i went to business school at columbia. i'm super trained in investing. and was working in that space. but i found it hard to invest myself, and i had many peers, bankers, doctors, lawyers, et cetera, who had the same frustration. it was a little bit like i'd been trained to be a race car driver but i was afraid to drive on city streets because the options were so bad out there. so i decided the only way to fix this industry was to build something myself. and we have bess emir ventures and menlo ventures, two great firms among our backers. along with angel investors and they share our long-term vision with this company which is to help give americans a better way to invest. >> we thank you and wish you a lot of luck.
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sounds like a very cool project. >> thanks very much. >> thank you. coming up we're going to have more from our guest host john kanas. we'll talk to him about what john was just talking about. he's the ceo of the bank united. >> cos your portfolio have what it takes to win the race? tired of watching your assets slide? feel like you are knee deep in [ bleep ]? well fear not. stocks to watch is next. we'll help you make it to the opening bell. [ male announcer ] this december, remember -- is. or you can get out there and actually like something. the lexus december to remember sales event is on. this is the pursuit of perfection.
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take a look at some stocks to watch. this is a really, really small cap stock. but, the market cap is twice what it was yesterday. so we'll mention it at least. bcd semiconductors going to be bought by rival chipmaker diodes for $151 million or $8 a share in cash. w.w. granger, i love this stuff. it would be -- doesn't it sound like a country singer, andrew? >> it cos. >> $70 million. settled charges that it admitted false claims related to gsa contracts, and with the u.s. postal service. pinnacle entertainment's been upgraded to hold from sell.
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at union gaming group. last week pinnacle struck a deal to buy ameristar casinos. and domino's mentioned positively by oppenheimer, saying that it's well positioned for the year ahead in terms of easing same-store sales comparisons. product innovation. and improvement in international results. let's get back quickly to our guest host, john kanas. bank united president and chairman. and i don't know. i've never been a politician. you ever been a politician? >> no. >> you're kind of a republican, right? william ross -- >> sort of. >> do you feel like the republicans have sort of been played pretty effectively by the obama administration? >> sure, they can't win -- >> because look at it. here's geithner again. and i think he slipped. but, i don't know if he wanted to let everyone know. but here's steve liesman and tim geithner. >> is the administration prepared to go over the fiscal cliff? >> oh, absolutely.
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again, there's no prospect to an agreement that doesn't involve those rates going up on the top 2% of the wealth yers americans. remember it's only 2 percent. remember all those americans, too, get a tax cut under that framework on the first $250,000 of their income. in some sense it's a tax cut for all americans. >> so i don't know whether -- i mean there wasn't much of a pause there. >> there was no pause. >> there was no pause there. and all along, i've thought it might be in the obama administration's best interest to go over, so that then they could -- but that makes me and people have called me cynical for how long now for months, saying that that's really cynical to say that that's what they've been planning all along. but he didn't have to move at all if this is what he wanted. and he didn't really move at all. >> i'm not sure it's been planned for months. but it's the best option now. >> but the republicans look like, you know, keystone cops, all this stuff and boehner and now what i really love, i was reading in the f.t. today that the talks were on track.
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>> yep. >> until boehner couldn't corral his guys, and there was a rebellion. when they were voting on plan "b," every democrat in both the senate and the house said this is a joke, this is a charade, this is just a -- this is nothing, this is a symbolic move, it's not going to work, we're not going to vote on it, but then when it doesn't pass that's the reason the talks broke down. how does that figure, andrew? can you explain that to me? >> i can't explain that. >> you cannot explain it? >> i cannot explain it. >> but now -- >> i'd lose. >> what are the percentage of people that are going to blame the republicans for going over the fiscal cliff? all of them. >>epublicans came to a gun fight with a knife. and probably all of them are going to blame the republicans. listen, taxes are going up. we're just talking about how much taxes go up, and on whom. >> would you -- if you were in the house, and you were one of these guys that got elected in 2010 and then re-elected, a lot of them did get re-elected, and supposedly don't care if they get re-elected again, would you use the debt eagle? once we go through this and the cliff is no longer, would you
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play hardball with the debt ceiling knowing that you're going to be blamed for that and lose your seat in 2014? >> it would depend on the promises that i made to get elected. what we have is a roomful of people who made promises that probably can't be kept. and they're worried about going home, and giving a speech in a high school auditorium and having somebody stand up in the back and say, hey, you said you wouldn't raise taxes under any circumstances. so that's an impossible promise to keep in today's world. >> you think it still works, though, if this all happens in january? >> sure. >> you think that then they can say they kept the promise? >> sure. i mean, look -- >> you don't think the public sees through that? >> i wish i 0 could say that i thought the public sees through. listen, the market doesn't seem to be too bothered by the fact that it seems at this point to be inevitable what we're not going to hit the deadline. so maybe the public does see through this, and are just waiting this out, and understands that this is going to be political drama, and it's going to be played out over the next 30 days.
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the market would indicate that at least now, that it's not really all that upset. >> do you -- we wanted these guys to rise above and we wanted them to -- was that sort of a -- was that sort of a hopeless campaign to try and get it done, were we asking too much? i mean i know that there are guys that signed norquist, right? so we got them on one side. i don't really think we've seen a very flexible obama administration for five years now. i haven't seen any tack to the center, any moderation whatsoever and he's got to appease his base. his base now are emboldened by the last election. are we asking too much? we're stuck in this position. >> of course we're asking too much. we're asking people to break their promises. why should the president -- >> he won in >> he won. and there's a lot to be said for winning. and he's playing his chips right now. and i think the republicans are just stuck. and there's not much they're going to do. nothing good is going to come out of this. other than taxes going up.
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and spending going down. >> which is going to put some pressure -- >> you're grinning now like a cheshire cat over here. you look very self-satisfied. watching this happen. look at you. >> well, now -- >> wipe it off. see if you can actually wipe it off your face. no, see i still see it. i still see it. >> no, it's a smarck, actually. >> now it's a smarck. >> john, thank you. we'll have more. >> try to read this seriously. >> i will. >> okay. great. >> just without -- >> without the self-satisfied -- >> the demise of the republican party. >> okay. coming up. what's preventing lawmakers from reaching a deal to avoid the fiscal cliff? we'll ask political strategists from both parties if a compromise is possible by the end of the year. plus we're going to continue to talk financials with our guest host bankunited ceo john kanas. and at the bottom of the next hour, chris whalen will join us to talk about banking in 2013. [ male announcer ] it's that time of year again.
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problems are piling up for lawmakers already struggling to come up with a deal to avoid the fiscal cliff. and the debt ceiling is next on the docket. treasuries accounting moves buy washington a little more time before the united states hits its credit limit. >> but will our debt problems prove too much for a deeply
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divided government to handle? we're going to talk to strategists from both parties, if there's any hope for compromise. the third hour of "squawk box" starts right now. >> debt ceiling. >> i like the song. >> welcome back to "squawk box" here on cnbc. first in business worldwide i'm joe kernen along with andrew ross sorkin. becky quick is off today. our guest host this morning, bankunited chairman and ceo john kanas. more from him in just a minute. first andrew ross sorkin. >> you've got to love lionel richie, come on. >> really? >> a little bit. >> i'm a commodores guy. >> you're a commodores guy? >> no, i'm not. >> you're not? >> no. >> the fiscal cliff topping our headlines this morning. speaker john boehner urging the senate to come up with a passable debt solution, promising to at least consider any bill the uper chamber
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produces. senator harry reid to continue tax breaks for households with incomes below $250,000. the senate bill would also likely contain an extension of expiring unemployment benefits. the fiscal cliff is not the only ticking clock in washington. in a letter to congress treasury secretary tim geithner said the u.s. would hit the $16.4 trillion ceiling on monday. without extraordinary measures geithner announced that the treasury would begin accounting moves that would keep the government from hitting its credit limit for about two months. the treasury secretary warning that it's hard to predict exactly how much time the accounting moves will buy, because ongoing cliff negotiations make it hard for them to forecast revenue and spending for next year. housing prices, some good news. on track to record their first yearly gain since 2006. it's a front page piece in "the wall street journal." it describes what is the strongest performance since the housing bust. the trend could accelerate this
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rebound we've seen in real estate. reason for the improvement, growing demand, shrinking supply, banks have slowed down foreclosures, and says here become more aggressive at modifying loans, or approving short sales. meantime, weak home construction in recent years is a factor in what has become on the lowest level of inventory and now at least 50 years, and i guess, i don't realize it's still missing the availability to get credit. is that still tough, john? >> it's a big issue. also still 22% or 23% of houses in america that are under water. mortgages are bigger tharn the value of the home. and that's going to continue to -- >> are you bullish? >> on real estate? >> yeah. >> compared to where i was three years ago yes. but remember that house values are still 30% below where they were. so it's encouraging to see them come up but it's a long way back. >> okay. let's get a quick check on the markets. u.s. equity futures, see how the market is setting up today, as we flip it around there. dow jones looks like it will open up about 26-points higher. nasdaq will be up about four points and the s&p 500 a little
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over 2.5 points. overseas in asia, had a mixed day. shanghai composite was down 0.60. nikkei was off or up rather close to 1% and the bombay sensex off about 0.50. and let's go to europe for a quick moment and you can see there, green arrows across the board. so, nice news in europe. joe? >> president obama and the senate are back in washington, from their holiday break to take part in further talks on fiscal cliff negotiations. joining us from new york is democratic strategist keith boykin and republican strategist susan del percio. keith, i'm going to start with you, because, you know, howard dean has been on more than a few times, he's a cnbc contributor. he said a month ago or a month and a half ago the best deal the democrats are going to get is to go over the cliff. why shouldn't we have listened to him and sort of seen the future? >> i don't know. i don't know that howard dean
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can predict how anyone can predict that. definitely there's some more leverage for the democrats after december 31st. the tax cuts expire, sequestration begins to take effect. the reality is no one wants to go over the cliff. neither republicans nor democrats. >> no, he does. >> well, i think for the -- >> so it's not no one. it's maybe -- >> no one should not be taken too literally when i say that. i mean the serious people in washington really don't want to go over the cliff. obviously i think there might be some political maneuvering advantage to one side or the other if they do. but, both sides have some interest in getting this worked out. the question is how do we get past this impasse? i think president obama's made some concessions already on the revenue number from $1.6 trillion to $1.2 trillion. on the threshold for taxes from $250,000 to $400,000. and indicated some flexibility on corporate taxes and other issues and c.o.l.a.s for medicare. so i think that there's some room here if we can just get the gop to make the movement on
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their side. they can't even get boehner to get agreement with plan "b" over there. i don't know what's going to happen. >> you wouldn't have done anything with plan "b." susan i was just talking to john kanas about the republicans just -- they can't win for losing here, they're like boxed into a corner. they're going to get blamed for something that maybe the other side was willing to do all along, and the republicans are going to be the one getting blamed and i don't think people are even going to realize that they're being had. >> they certainly fumbled the ball. and the fact is is that they did have an opportunity to really look like they were going to become the party of yes. and they at some point they stopped working with the administration, and that's what they needed. they needed the obama administration to give -- help them get a path wrai to yes. that hasn't happened. i mean we hear a lot of press release politics coming from elected officials who wants to go over the cliff. who doesn't want to go over the cliff. the fact is, is that it's in both sides' best interest to get this done. they want a two-year deal because no one wants to keep
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running on this stuff. and most importantly, to president obama, he has a state of the union and an inauguration speech to give. he wants to work on his legacy, not on this. >> so what -- you just said that the republicans really did just play right into the hands of the democrats. is that what you said? >> well, i think they fumbled the ball a little bit in their negotiations. i think, for example, even the optics of it, having president obama back in washington today, and having congress still out, is not the right message to end. people right now feel that the republicans are the party of no, that they are the ones causing this, they are going to get blamed. the fact of the matter is, is that they are doing the fiscal responsible thing here and that's where they can hang their hat. is that they have to hold on for deficit spending, and they still have the debt ceiling to hold in their back pocket if they need to. >> so what would, if you had been advising boehner, what would you advise him to say yes to?
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>> well, you know, he has to push the president to get more spending cuts. >> well, he tried that. he tried that. the president's in the cat bird seat, though. the president can say no and the republicans still get blamed. >> and then he came up with this plan "b" is really where things went off the rail. because it just looked like a mess publicly. >> all right. keith, what -- i mean, i know that it's not your party, but what would you advise the republicans to do, if anything in the next two or three days? >> i think one of the things is we need some congressional reform. you know i don't think that's going to happen by january 1st. maybe we could do some sort of minimal measure here. it doesn't take a majority of the majority to get legislation passed in the house. that's not a rule anywhere in the constitution. that's just an artificial rule that's set up by the republican party and john boehner. they can bypass that, and get a majority of the democrats, and a few of the republicans, and a bill that has bipartisan support. or they can get a deal that has some of the republicans -- most republicans, and some democrats,
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i mean it doesn't have to be all republican. >> but boehner has to get re-elected, keith. that's the thing. >> that happens on january 3rd. and i think that's the reason why boehner doesn't have an interest in doing this right now until he does get re-elected. it just shows that the party -- i don't understand how you can negotiate with another group of people when they don't even have clear consensus among themselves. >> well, democrats don't have clear consensus among themselves, either. >> you don't know -- the president, you know, unfortunately didn't have to show what he could deliver, keith. you did hear a little carping about c.o.l.a., cost of living increase, and if he actually did anything hard, which would have brought the republicans along, you know, he could have lost his entire base. >> but here's the problem, though. the president -- these two people ran on different issues. i mean these two parties ran on different issues. president obama ran not on spending cuts, but on tax increases for the wealthy. it's something that's going to happen next monday anyway or tuesday regardless of whether the president does anything or there's a deal or not. because it's just going to
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expire. >> he's known that all along. >> but the republicans ran on spending cuts. so they're the ones that ran on this. why don't they put up their spending cuts? the president didn't run on that. and the irony is when he did mention spending cuts, $716 billion in medicare cuts during the campaign, mitt romney and paul ryan and all the republicans, who wanted to do the exact same thing he did, they jumped on his case for proposing cuts to medicare. so how can you negotiate with a party that isn't serious about its own caucus, and isn't capable of controlling them and doesn't have a serious plan for dealing with spending cuts on its own, because it's afraid to take the heat? nobody wants to cut spending. let's just admit that. but if we're going to do it, somebody's got to take the heat and the republicans have been the party advocating it for so long, so take the heat republicans and tell us exactly what you're going to do. are you going to cut mortgage interest deductions, charitable deductions, federal and state tax deductions? let us know where you're going to do to pay for this debt reduction that you want. >> the fact of the matter is,
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it's not going to get done with just spending cuts or increased taxes, it's going to have to be a combination of both, and right now the worst part of it is, and i think where we see the instability, especially when it comes to the markets and going forward into a potential recession, is that right now, we're just nibbling at the edges. we do need that bigger grand bargain. we do need more stability. and it's only going to work if both sides come to the table. the fact is the obama administration, and more importantly the democrats, have not allowed the in congress have not allowed the administration to come forth with real spending cuts. >> but susan. >> let's face it the republicans said that they are willing to look at tax increases. a few weeks ago, a lot of people said, okay, grover norquist, we are going to say, if we have to make this to get our country through the toughest one of the toughest times, we will vote for tax increases. >> and it didn't even come to a vote in the house, because they couldn't approve boehner's plan. >> the vote in the house -- >> you're making my case. >> that was a ridiculous plan.
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>> they can't even get it to a vote in the house because they don't even have consensus on it. president obama has proposed something. look we have agreement in both parties that we don't want taxes to go up at least for the people who make 250,000 dollars or less. we want to do something about the amt. both sides agree with that. let us at least pass a bill to deal with that. the senate passed a bill back in july. why can't the house just confirm that? >> oh, come on because the senate is a joke. they haven't even been able to pass a budget in over three years. come on. >> the senate passed a deal in july that dealt with the amt. it dealt with dividends and capital gains and it dealt with the, the fundamental issue of the tax rates. so i mean -- >> no, it dealt with the -- >> -- won't go up. >> i mean, let's have some consensus. let's at least agree on the things that we agree on, and then work on the more troubling issues afterwards. >> i saw annie yesterday, keith, and daddy warbucks had that same hairstyle. i think it's very compelling. i think -- >> i don't know if i'd call it a hairstyle. >> but it's a power, daddy
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warbucks was hot. he was. >> power. >> power i think is what it is. >> not a lot of response to that one. >> i think you know exactly what you're doing, yeah. anyway, thank you, susan. thank you. >> don't try it susan. you look good like you do. all right, see you later. thank you. >> okay, guys. coming up, the latest on the winter snowstorm that's slamming the east coast. we're going to check in with the weather channel next, and still to come, what to expect from the banking sector in 2013. chris whalen is going to join us on set at the bottom of the hour. >> chris whalen. we haven't gone to a break yet. >> you can't keep a straight face. >> why am i comfortable with this and you're not comfortable with this? >> i'm very comfortable.
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>> if we're going to be together for years and years you need to be comfortable with this. >> okay. as we head into a break. check out "squawk box" market indicators.
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welcome back to "squawk box." shares of marvell technology falling this morning. company says they're going to seek to overturn a jury's patent infringement finding. yesterday a federal jury found marvell infringed two patents held by carnegie mellon. the chipmaker has been ordered to pay $1.2 billion in damages. another big payday maybe for -- >> lawyers. >> now to the winter storm slamming the east coast. the weather channel's reynolds wolf joins us now with more. is this one named, reynolds? >> this one is indeed named. this one is given the name euclid. go figure. i say that spells trouble. it's certainly going to spell trouble for people trying to travel out of new york. you look at this color code
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behind us, where you happen to see the orange and the yellow. just like on a traffic light you're going to have a little bit of caution there. but ground travel at least air travel may come to a screeching halt in places like boston, portland, maine, mind you and even in buffalo, all due to this immense storm. take a look at it. for some people it means just rain like in new york and back over towards long island. but also means a lot of wind with some gusts approaching 50, 60, even 70 miles per hour. in upstate new york, back into maine, and new hampshire and vermont, the story is not rain, it's not even really that much in terms of wind, it's going to be snow. some spots up to a foot. so let's zoom in again on parts of the northeast. new york, you expect the temperatures to be about 38 degrees for a high. 32 in cleveland. very nice in the mid-atlantic and into the southeast. but in the nation's midsection, snow showers may pop up into the northern plains. central plains. but still very quiet in texas. and for the west coast, here you go, portland some scattered showers, early. then partly cloudy and very quiet from san francisco southward into l.a.
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san diego, some rain layer early, giving way to sunshine into the afternoon. back to you guys. >> okay. thank you, reynolds. appreciate that very much. let's get back to our guest host john kanas. talk about banking. a lot of regulations that are supposed to go into effect that kind of haven't yet. what's the biggest that you think is going to have the biggest impact 2013? >> a number of things. the cfpb is yet to come out with the definitions of qualifying mortgages. which is -- >> consumer protection? >> consumer protection. it measures the ability to pay for mortgagees. that has the -- that has the potential to become a serious impediment in the mortgage -- >> when will that happen? >> we're not sure. it's all part of the dodd-frank. it should have happened. >> there's something like 200-plus regulations that are still not on the books yet. >> something like 200 more, 240 regulations that are not yet -- >> derivatives, still? >> yes. >> and when do you think that's going to happen? >> nobody's really sure. >> and what is it going to look like and what's the impact going to be?
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>> well, we know that the impact will be another layer of regulation, we're just not sure what it's going to be. that's just dodd-frank. we also have to find out the issues of basel 3. and then the underlying issue in banking which is the economy. >> volcker? >> volcker -- >> we had paul volcker on the program a month ago. >> volcker started out to be a simple issue and has become one of the more complex issues in banking since it's now -- bankers didn't figure it would affect smaller institutions but now it affects institutions all the way down to $50 million community banks. and it's got people running around with their hair on fire trying to figure out how to implement. >> would you buy -- giving everything you just talked about, would you buy bank stocks? >> i would buy bank stocks selectively. i wouldn't buy the industry. i think this shapes up to be a reasonably good year for the larger banks, because of where they're started. remember if you back out the
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reverse split and citibank it's a $4 stock trading for a fraction of where it once traded. same could be said about bank of america. as the economy heals and then as the housing secretarier comes back, i think they can expect to see some improvement there. there's also a ton of capital, excess capital in the banking sector, and a lot of that is getting returned in the form of stock buybacks and dividends. good news/bad news. >> you said something that struck me in the last hour, maybe a little nervous. you think there's going to be a lot more layoffs? >> well, sure. the industry is consolidating, and shrinking down. the consolidation part hasn't really started. the shrinking down part started. citibank just announced 11,000 -- bank of america announced 30,000 a few months ago. smaller banks are quietly having to shrink down their institutions. closing branches. there's thousands too many branches in the united states that are manned by people. >> is there still a shot for consolidation in this world, in
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this environment, or in this sort of post too big to fail world nobody wants to try? >> there will be consolidation. when people start getting used to the prices that these places are worth. i mean remember that bank stock investors were used to seeing their institutions get bought and sold at significant multiples of book value. the returns that are coming out of banks today don't justify that kind of price. so when people start getting comfortable with what these institutions are worth they can only earn 8% or 9% on capital and 1% on -- >> we had an analyst on yesterday or the day before who said that the big winner in 2013 among the big banks was going to be jpmorgan. but that the big loser was going to be morgan stanley. do you buy that? >> no. i'm not sure that it's possible to predict that since the new year hasn't even started yet. the idea that jpmorgan could be the big winner, of course it's possible. but jpmorgan is so large and complex i'm not sure that it's possible to make that kind of
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prediction. >> what do you think about morgan stanley's model? it seems to be shifting. >> i'm not sure what morgan stanley's model is anymore. and i think that those who -- i think that james is rethinking the model inside of morgan stanley. i wouldn't be surprised to see some major rethinking inside of morgan stanley this year. >> what would you do? what would you be buying right now if you could? >> bank stocks. >> bank stocks, public -- i assume you're going to go and try to buy up some more banks. that's what you do. >> we'll buy underperforming small banks and midsize banks when we can buy them at the right price. >> right. >> and, as an investment, selectively some of the larger banks are probably going to have a decent year in their stock price. but i'm not sure that says much about the return. >> okay. john, stick around. don't go anywhere. we're going to keep talking. and what do you got? >> and -- >> stay with us. ♪ hello is it me you're looking for ♪ >> i did. >> thank you. >> welcome.
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>> do you have any other -- do you have any requests? >> i don't -- i'm going to have to get some requests, clearly. >> you said you're a fan. you should be able to come up with some right, right away here. this is a little bit of a spat we're having now which i don't think either one of us wants right now. do we? >> no. >> okay, coming up -- >> not with lionel on. >> coming up, there's so many just really lame songs to play. you say -- from commodores, from -- >> i like them, and when i was a kid i heard lionel richie. >> you're going to hear a lot more today, andrew. coming up, the way we were. weekly jobless claims coming at 8:30 a.m. eastern. economists expect initial claims to pick up to 364,000 from 361,000 the previous week. then we're going to talk to chris whalen for a look at the fiscal cliff's impact on financials. and the outlook for twoirn. he's once, twice, three times an analyst. [ male announcer ] this december, remember -- what star ding a friend...
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welcome back to "squawk box." shamu is swimming back to the public market. seaworld filing an ipo offering of up to $100 million. the theme park operator was once a publicly traded company before being sold a number of times. it's current owner blackstone group bought it from anheuser-busch back in 2009. coming up we've got more lionel richie music.
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plus breaking economic data. just a few minutes away from weekly jobless claims, as we head to a break take a look at u.s. equity futures. announcer ] you are a business pro. executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro.
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welcome back to "squawk box." we are just seconds away from weekly jobless claims and rick santelli and jim iuorio are standing by at the cme. you know, rick, whenever anyone compared to the cliff to t.a.r.p. i never really bought that. because t.a.r.p., i mean, the commercial paper markets were freezing up. it was -- i just don't think it's really the same thing, is it? it's not as front and center as that. and i -- we've talked about it so much, it's hard for me to believe the markets could just all of a sudden decide they're going to fall off a cliff like the fiscal cliff itself. what do you think, rick? >> no, i somewhat agree. i think the reason i brought it up, and i think i was one of the first to bring it up is, it just gives you a market impetus to get something done. but i think categorically they're nothing the same. t.a.r.p. was about some real issues. fiscal cliff is about being afraid, i think. >> let's do the numbers. >> 350,000 on initial jobless claims. that is definitely less than we
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were looking for. it's a dozen less than the revised number you're looking at last week. 3.206 million on continuing claims. and just to put a face on it, 350,000. when was the last time we had 350,000? well, let's see, we had 344,000 on pearl harbor day. this is probably a level that we should pay attention to. it's like logically important, that it's going to give us any clues as to how many jobs we're going to create on any first friday. i think that information line is broken. let's get back to that other conversation now. let's go with it. you know, the issue with t.a.r.p. was, yes, there were things that were freezing up. that responsibility adults had to come and do something, and i remember not agreeing with maria bartiromo at the time because everybody was disappointed they didn't hurry up to write a check for seven eighths of a trillion
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dollars without any thought. so i thought that was the negative issue here. i'm not wearing my button today as you can see. and i think i'm going to be remiss to wear it anymore to be honest with you, gentlemen. i think that i was looking for the kind of rise above where both sides brought something to the table. it's turned into a game of childish nonsense, and i think it's beneath the kind of leadership of the greatest country on the planet. >> yeah. all right. for more on the day let's get to jim iuorio director of t.m. amens institutional services and a cnbc contributor. i guess the reason i phrase the question, jim, the markets had been sort of quiet, the vix has been kind of quiet, as well. is something on the horizon, or i mean we've talked about it so much, is there anyone that doesn't know? >> no. i just think the markets have grown accustomed to the notion that we're actually going over the cliff. we were always going over the cliff, and that gives the republicans ground cover to lower taxes, and not raise them.
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is it a game? is it ridiculous that they play this with the economic future of the country? of course it is. but you drew the connection to t.a.r.p. that's when we first learned that they can show some incompetence at very critical moments. the market's fine with that right now. but i do think the consensus is that once they reach a deal, even after the cliff, that the market's going to knee-jerk higher. when everyone is on the same side of the boat that worries me a little bit. i increased some short in the market the other day. >> it seems like the markets would know if it was going to be a really horrific thing. you just sort of said that once -- >> yeah. i agree -- >> you don't think that's a horrific thing. >> no, the markets aren't saying a horrific thing. the russell 2000 is up 8.5% since mid-november. i think they've just grown accustomed to some incompetence. and that juxtaposed against things going well, which we just saw numbers reminding us that things aren't too bad in the economy. >> jim, stock markets go down if there's a recession. do we now have to -- do we have
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to decide maybe if we did fully go over, and stay over, is it absolutely shave two points off of our gdp? >> there's no doubt. >> it does then -- >> then the market -- >> no. >> what do you mean no doubt? >> believe what you read in the papers, jim. there is doubt. there most certainly is doubt. >> what i believe, just of course what i believe is i think the markets think we're going over the fiscal cliff and quickly have a resolution. >> why do we look at the dow jones industrial average to handicap if this country's going to go down the sewer in a couple of days? >> that's the best collection of news. >> that's where i always look for the news. >> we can't afford our bills anymore. the stock market is an immediate gratification for investors to make money. >> no. >> i don't have a problem with it. but it doesn't give you a glimpse into our future, or our kids' future. >> yes it does. >> the fact that we have 100 trillion dollars of underfunded liability, isn't is a question whether that's going to work. >> if you can tease out the fact
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that the fed has by throwing in all of this money over the last couple of years and that's a difficult thing to do. >> neither does -- >> the stock market takes all the news stories and filters them for us. i think the stock market -- >> absolutely. >> -- of what the real story is. >> it gives a speech about hitting the debt ceiling. i'd like to see if it could even count to a million, much less 16.4 trillion. >> i'm through fighting, joe. >> he's got the crowd. he's with the crowd. he's going to win. >> i've leshed. i mean, that was the are you listening mr. president. that was the famous one. that was me on this end. i'm forrest gump. i just get them going. people don't even know i'm there. >> i'm just going to back out. >> -- all the people in congress. >> the thing with rick and i is we agree on about 99% of the things. he's talking about the 2% that we don't agree on. i agree with him that the stock market is immediate
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gratification particularly when you're flowing in the fat. >> he's not yelling at you. he's yelling at washington. >> yeah. >> i like that. you see how it's done now. >> it's a beautiful thing. >> all right. rick, and jim iuorio, thank you. i like passion. >> joe, joe, do me a favor. make sure you watch the guest today at 11:20. we have bill prezza and this one's really going to be fascinating. >> i do watch at 11:20. i do, rick. excellent. thanks. who is this guy? >> bill prezza. great writer. he writes things that really get you thinking. >> awesome. all right. don't hold back, rick. >> i never do. >> okay, guys. >> coming up, the impact of the fiscal cliff on the big banks. financial analyst chris whalen. he's here. he's going to join guest host john kanas for a look at the financial sector in 2013.
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>> when you miss "squawk box" you fall behind on global business news. when you fall behind on global business news, you make bad investment decisions. when you make bad investment decisions, you lose all your money. when you lose all your money, you are tempted to hatch an illegal ponzi scheme. when you hatch an illegal ponzi scheme, you get wrapped up in an interrogation room. don't get roughed up in an interrogation room. watch "squawk box."
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♪ you are the sun you are the rain ♪ ♪ you need to know i love you so ♪ ♪ and i'd do it all again and again ♪ ♪ whoa >> the problem is that people that are just tuning in don't know that it's a -- >> it's a running gag. >> they think we're serious and that makes me uncomfortable. anyway, welcome back to -- you are on the record. >> you like it. >> i always like it. >> i did. >> i also like -- >> remember when his daughter did that show as paris hilton? >> yes. i forget but i know who you're talking about. richie. but -- >> nicole. >> nicole. the futures right now, up 22 points or so.
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quiet. for being so portentous, for waiting, ominous, the vix quiet. the markets still above 13,000. we'll see whether that all changes and whether, you know, we just had the discussion. is it really a tarp-like moment? that was frightening. remember andrew. >> i do remember that. i'm not sure we're there. >> right. >> the commercial paper. biggest companies in the world unable to do overnight funding. >> i don't think there's any comparison. >> i don't either. >> although we've tried. >> chris whalen is here and financials have been the top performing sector in 2012, seeing gains of 26% year to date. the low interest rate environment is putting a lot of pressure on profit margins. what's the story for 2012? >> whalen is the executive vice president for -- this is new for you, carrington investment services. and our guest host, john kanas, president and chairman of bankunited. do you have anything positive to say about banks ever? >> oh, no. i love his banks. >> you love his banks? >> anything below u.s. bankcorps
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i'm pounding the table. simply because of legacy issues. >> you think -- >> when does the legacy issue, when are there no longer legacy issues? >> when the courts sort it out. i said in the past some of these companies should have been restructured, we'd be done by now. lehman brothers, we don't hear about that anymore because it's all settled. we're going to do it the hard way, which is french warfare really in court. and then you have -- >> you talk about the mortgage style and all of that. >> put-back claims, broad claims. you have government hanging in the background. we still don't know if fannie and freddie aren't going to come back as the top five banks again and take another bite in terms of put-back liability. there's a lot of fluidity. that's not to say that these banks are an improved value. b.a., citi, a lot of people -- >> you buy them or you wouldn't? >> me personally, no. but i think a lot of people see it as value. i think they could both double this year, simply because then you're at book value. i think that's fairly valued for both of those. >> what do you think about some of the bigger names?
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jpmorgan, wells, goldman, morgan stanley, which now feels like they're in a different business. >> they are. totally agree with what john was saying before. i'm still waiting to hear from morgan stanley what is the business model. they've had to put half of their expenses over the last five years. i still think they could spin off the retail business at some point to get rid of it. much more profitable. >> isn't that the business that james gorman has taken this company into? >> yes. it's like citi. it's a new narrative, andrew, roll with it. the business has changed. i think in this environment, do you want to own that retail business? what do you think the net gross margins are at smith barney? >> it's impossible to say. >> they don't tell you. and i don't know that it's that profitable of a business. i know a lot of f.a.'s as you do, that business is under a lot of pressure. the big houses keep coming back to them, raising the minimums, taking economics out and what they're really telling you is unless you're a 5 million or 10 million dollar client they don't want you. >> where are you in the housing market vis-a-vis the mortgage
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business? >> well, at carrington we're looking for 5 million, maybe 5.1 million home sales next year. volumes will probably be down. we agree with the mortgage bankers association, simply because the financing wave is going to taper off. the obama administration is talking about refinancing again. i think you're going to see some proposals coming out of there. but the government is 90% of the market. if you look at firms like ours we basically do ginnie mae and nonconfirming production. we'll do maybe a couple billion dollars this year. that's a drop in the bucket. this is still completely a government market. >> i asked john this question earlier, talking about some of the regulations from dodd-frank which haven't come into effect yet. of the 200 plus that are not on the books, what's the one or two that you're looking at that you think are a game changer. >> in terms of what? >> that may ultimately change some of the derivative stuff, what you think the impact of both -- >> we've talked about this. volcker has taken a lot of liquidity out of the market just in terms of -- >> but none of this is on the books. nobody's actually -- it's not there yet.
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>> the behavioral changes have already come because the lawyers have told the banks you have to live with the volcker rule. they've already done it. my big fear, though, is that the conservatives are trying to winnow down fannie, freddie, and we agree with. we think the government should be in the bottom quarter of the market but the private sector is not ready to pick up the ball. if people think a 3% 30-year mortgage is normal, where the average is probably 6%, 7%, that's where the nonconforming market is. we still have weird pricing issues to work through. if congress takes away the mortgage interest deduction, that changes the game. >> how big a change is that? >> well, look at it this way. >> and let's say we go from million to half a million? or from a million to 250. >> let's assume we get rid of it. >> completely? >> three quarters of the market -- >> is that realistic at this point? >> at some point it's got to be on the table. you know the average mortgage is somewhere in the $200,000 range. so i think that you might cap it at that level and then everybody
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say above quarter of a million dollars has to pay the full load. but that's going to change the nature of the market. remember a third of the market today are investors. so it's a very different time than a few years ago. and that's why we've tightened up the southwest. some of these other western markets that had already cleared their backlog. nonjudicial states for fu foreclosures. here in the northeast we've got connecticut, massachusetts, new york, new jersey, we got a lot of work to do here. >> it's a very fractured market. >> totally. >> take a look at phoenix. what happened in phoenix, it's up 22%? >> it's off the bolt up. if you look at where it was in '05 we've only really recovered about a third of what we lost. >> how much do the banks fight back on this tax issue? on the mortgage deduction issue? if it gets -- if it actually gets on the table. >> it's not just the banks. everybody in that business will fight back. the whole mortgage industrial complex as we call it, right? but at the same time, the congress has to look for revenue. >> right. >> that's the one issue. and i think also you're going to
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go back to something my friend josh riser's been saying for years. we maybe should turn it into a credit, get people to build equity in their house instead of leveraging it off interest. i think that would be a good way to change that model. encourage people to stay in their home. we were one of the first shops to start modifications because it's better for the investor, too. i think it would be better for the economy if you got people looking at home as a savings vehicle, rather than -- >> how would you do that, exactly? >> if you build equity in a house you get credit for it against your taxable income. >> how do you like that, joe? >> i have to think about that. >> like a reverse tax. >> like, it's -- >> credit. >> instead of pulling sales into the present from the future what you're really doing is going back to the way a house was in the '50s. saying this is forced savings, stay in a house 10, 15 years and when you sell it you get the benefit of the equity. you don't do it like an atm machine. take cash out. nobody is doing cash out lens today. it's a very conservative market we have today. >> you made a comment very early on, i was talking to you about which banks you like. you said i only like banks that are smaller than u.s. bancorp.
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>> cash flow, low volatility, very high adjusted returns. that's why i love the preferred trade. but it's run 16 points this year. how could you not sell if you made 16 points on price, plus you got a 6% to 7% yield. >> if you had to buy the banks, what banks are you guying? >> i would look for yield among the smaller institutions, so u.s. bank, down to a bank of hawaii, you want to know what citi is going to look like in a couple of years, look at bank of hawaii. because you know he's going to make that bank make money. even if he has to throw people out windows he's going to make that bank profitable. >> are you a fan of citi in that regard? >> i'm still waiting for them to tell me what the business model is. getting back to the point about morgan stanley. i think it's got great potential. citi was a good subprime lender and then they chased volume. whenever you chase volume you get in trouble in this business. >> you see any in the financial markets, you see any tumult next week? >> well, when the fed adjusts rates you're going to be looking at some very significant
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potential losses in the banking industry. not in the health and maturity -- >> not the fiscal cliff? >> no, i'm just talking about interest rates. >> anything happening if we go through? you know it's coming up, monday is new year's eve. >> it will hurt the economy which will hurt banks. but banks have rallied, i think, mostly because of the fed. they have cash flow, they were underperforming assets. allocations were very low on financials. so we've come back. that's the first point. but i really don't see huge volume growth in the industry. if we have mid single digit revenue growth next year for all banks, that would be good. i think credit costs will keep coming down. that's what's been driving the increase in operating margins in the industry. just falling -- go when does that reverse itself? >> well, i don't think it does. we're at about 1.1% charge off the total loans. it was twice that a year ago. we have peaked up in the fours. so we're in much better shape. but remember the industry is only making 1% return on assets. most banks are 70% to 80% loan. so if you're still charging off on this 1% of total loans you're
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not that profitable. >> chris whalen, thank you for being here this morning. >> happy new year. >> absolutely. >> thanks again. >> simple life. >> simple life. >> paris hilton. >> paris hilton. >> i fried to get her -- >> thank you to doug. >> yeah yeah. here's something that i want to show you. and that is, we were talking about the vix. i want you to cry when you see this. we were talking about the vix not moving. here's a one-month chart of the vix. what is that saying? it's up in the last week, it went from 15.5 to 19.5 in the last week. that's a 25% move in the vix. we don't really think of it as being high because it's below 20. but in the last five trading sessions, it's at least acting like it's aware. >> where were you in is aware in t.a.r.p. land. way up there. but at least, people who said it hadn't moved, like the phoenix home prices, up 22%. >>ed fed sucking all the
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duration out of the market, why everything is so quiet. if they stop doing that we go back to a more normalized market. >> you remember the "saturday night live" when eddie murphy was still on, you remember when he used to be buckwheat? i don't think he could do it today. sang this song, put the subtitles on it, you're unce, tice, fee times a madey. we should get that clip. >> nbc property. >> looking pinub in all the wrong places. a major investment in michigan, that story next, and more from our guest host who is once, twice, three times a bank ceo. [ male announcer ] this december, remember -- you can stay in and share something... or you can get out there and actually share something. ♪ the lexus december to remember sales event is on. this is the pursuit of perfection.
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welcome back to "squawk box." dow looks like it would open 25 points higher, up almost two points, the nasdaq a little over close to two and a half points. making headlines, ford plans to invest more than $773 million in new equipment and capacity expansion across six plants in southeast michigan. the automaker has committed to invest $6.2 billion in u.s. plants by 2015 as part of an agreement with the uaw.
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coming up, our guest host this morning has been john can his, chairman and ceo of bank united. we are going to give him the last word. easy like sunday morning when "squawk" returns. as you s customer satisfaction is at 97%. mmmm tasty. and cut! very good. people are always asking me how we make these geico adverts. so we're taking you behind the scenes. this coffee cup, for example, is computer animated. it's not real. geico's customer satisfaction is quite real though.
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this computer-animated coffee tastes dreadful. geico. 15 minutes could save you 15 % or more on car insurance. someone get me a latte will ya, please? [ male announcer ] you are a business pro.
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executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above,
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and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro. >> i think it's "stuck on you." >> stuck on each other. here on "squawk box." stock of the day john kanas, stuck on the show, stuck with us nor two hours, in spite of -- in
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spite of what's happened. you're right. he's -- he writes beautiful music. he does. a little bit -- heard it all too much. >> part of the problem. >> but nothing slows -- nothing works better than with lionel richie, slow dissolve fast. marvel, the company seeks to overturn a company's patent infringement finding. a jury found that marvel infringed on a couple patents held by carnegie mellon. we haven't added up all the lawyers' fees. 1.2 plus 1.1. >> thought about going into the legal world? >> no. no. no. it's not -- >> are they the bane -- >> going to be a lawyer until i found out what they do. >> we have a lotf

Squawk Box
CNBC December 27, 2012 6:00am-9:00am EST

News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin. Business news and talk as the trading day unfolds on Wall Street. New. (CC)

TOPIC FREQUENCY Citi 17, Washington 15, Boehner 13, Geico 10, New York 10, Chris Whalen 7, Toyota 6, Morgan Stanley 6, Joe 6, Kanas 5, Andrew Ross Sorkin 5, Bob 5, Obama Administration 5, Volcker 4, California 4, New Jersey 4, Scottrade 4, Seattle 4, Lionel Richie 4, Annie 4
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